Commodities Update — Wheat prices gain, dairy falls, iron ore soars

RIYADH: South Korea’s consumer prices rose at their fastest pace in more than a decade in March as the Ukraine war fueled surging energy and commodity costs, adding pressure to the central bank ahead of its rate decision meeting next week.

The consumer price index for March rose 4.1 percent from a year earlier, official data showed on Tuesday, the fastest increase since December 2011 and outpacing a 3.8 percent rise tipped in a Reuters poll. 

Core inflation, which excludes volatile food and energy costs, also jumped 2.9 percent from a year earlier, staying at the rate seen in February. The sustained rise in core prices shows surging fuel and raw materials costs are feeding through to consumers.

Japan’s household spending

Japan’s household spending rose for a second consecutive month year-on-year in February, helped by a flattering comparison with last year’s sharp pandemic-induced slump but the consumer sector is now facing growing headwinds from soaring prices.

Households cut spending from the previous month as pandemic curbs, rapid food and fuel price rises and the coronavirus kept wallets shut, casting a shadow over the world’s third-largest economy.

In a sign of trouble for consumer sentiment, real wage growth stagnated in February as global inflationary pressures weighed on household purchasing power.

“Prices will outpace wage gains from now on, so consumption will be on a sluggish trend,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

Romania lifts interest rate 

Romania’s central bank lifted its benchmark interest rate by half a percentage point to 3 percent on Tuesday and said inflation would rise more than expected as fuel and food prices would outpace a government energy support scheme.

The bank raised its lending facility rate to 4 percent from 3.50 percent and its deposit rate to 2 percent from 1.5 percent, and said it would retain firm control over market liquidity.

All analysts polled by Reuters had expected Tuesday’s hike, with a median forecast for the benchmark rate at end-2022 at 4 percent.

Australia’s hike interest rate

Australia’s central bank on Tuesday opened the door to the first interest rate increase in more than a decade as it dropped a previous pledge to be “patient” on policy, a major surprise that sent the local dollar to nine-month highs.

Wrapping up its April policy meeting, the Reserve Bank of Australia kept its cash rate at 0.1 percent but noted inflation had picked up and was likely to rise further, while unemployment had fallen faster than expected to 4.0 percent.

“Over coming months, important additional evidence will be available to the Board on both inflation and the evolution of labor costs,” said RBA Gov. Philip Lowe in a statement.

Italy’s service sector 

Growth in Italy’s service sector slowed in March as the war in Ukraine weighed on demand, a survey showed on Tuesday, the latest sign of weakening momentum in the eurozone’s third-largest economy.

S&P Global’s Purchasing Managers’ Index Index for services fell to 52.1 in March from 52.8 in February, while remaining above the 50 mark that separates growth from contraction.

The reading beat the median forecast of 51.5 in a Reuters survey of 14 analysts.

The sub-index for new business in the service sector came in at 52.6 in March compared with 52.9 in February.

Growth in France

France’s services sector grew at a faster rate in March, a survey showed on Tuesday, although businesses’ confidence over the outlook weakened due to inflation and uncertainty caused by Russia’s invasion of Ukraine.

S&P Global said that while French business activity had benefited from the removal of COVID-19 health protocols in the country, its measure of business confidence had fallen to a 14-month low in March.

S&P Global said its purchasing managers index for services rose to 57.4 points in March from 55.5 in February — exactly in line with an earlier flash estimate.

Canada’s exports 

Canada’s exports rose 2.8 percent in February to a record high, driven mostly by energy products, while imports climbed 3.9 percent from the previous month, led by metals, data from Statistics Canada showed on Tuesday.

The country’s trade surplus with the world narrowed to C$2.66 billion ($2.14 billion), slightly below analyst forecasts of C$2.9 billion. But exports came in above expectations at C$58.75 billion, with imports also beating at C$56.08 billion.

Energy exports rose 7.8 percent to a record high, making up more than two-thirds of the total increase, while exports of non-energy products were up 1.2 percent. In volume terms, exports were up 0.6 percent.

US trade deficit 

The US trade deficit barely budged from a record high in February, suggesting that trade remained a drag on economic growth in the first quarter.

The Commerce Department said on Tuesday that the trade deficit dipped 0.1 percent to $89.2 billion in February. Data for December was revised to show a $89.2 billion shortfall, still an all-time high, instead of the previously reported $89.7 billion.

Economists polled by Reuters had forecast a $88.5 billion deficit. Trade has subtracted from gross domestic product growth for six straight quarters.